A major Wall Street firm is on correction watch.
Despite the latest market bounce, Morgan Stanley’s Mike Wilson is bracing for an S&P 500 decline of at least 13% between now and September.
Wilson cited technical headwinds on CNBC’s “Fast Money” on Monday.
“It does have all the hallmarks of what I would call a bear market rally,” said the firm’s chief U.S. equity strategist and chief investment officer. “Things got oversold.”
He also singles out the tech-heavy Nasdaq, which rallied almost 2% on Monday. It’s up more than 13% over the past three weeks.
“The Nasdaq has run into resistance again here…. throwing back into the 200-day moving average,” Wilson added. “It’s a good time to remain defensive because, look, we’re late cycle.”
He has been worried the inflation surge and Federal Reserve’s tightening policy increases recession risks. It could create an environment, according to Wilson, where stocks perform worse than bonds.
“We don’t think there’s a recession this year. But maybe next year there could be one,” Wilson said. “So, the markets are going to trade defensively.”
Wilson, the market’s biggest bear, believes the S&P 500 will ultimately end the year at 4,400 — about a 9% drop from the index’s all-time high hit on Jan. 4.